National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Jamieson Excerpts

Committee stage
Thursday 6th February 2025 Grand Committee

On that basis, I ask the Minister to look at this, because it is an extremely important part of our governance structure in this country. We are a unitary authority—this is not a federal nation—but we put great store by our local councillors and the, in the main, excellent work that they do. They are under a lot of pressure at the moment. This amendment simply asks the Government to look at the situation, to use the evidence available and maybe to develop a scheme in order to ameliorate the most acute cases of financial distress. It is my pleasure to support my noble friend Lord Fuller’s amendment.

[Lord Jamieson (Con)]

My Lords, I also support my noble friend Lord Fuller’s amendment. Local government finance is in a parlous state, with more than 70% of funding used for adult and children’s social care, which, due to demographic pressures, is growing substantially above GDP and inflation. In some places, this is exacerbated by housing costs due to the housing shortages across the country.

The latest local government finance settlement has not helped, as the additional government funding is the worst I can recall, after taking account of national insurance, since I became chair of the Local Government Association in 2019. I agree with my noble friends’ comments on this. Yet the financial pressures on local government continue, forcing many councils to put up council tax by the maximum of 5% and, in several cases, to seek additional rises above that. National insurance rises pose a particular burden on local councils. The LGA, as mentioned by my noble friend Lord Fuller, estimates that the cost is around £1.7 billion, of which around £1.2 billion is indirect. The Government have committed to fund the direct costs of the national insurance rise but, as my noble friend Lord Fuller mentioned, that does not even cover the full direct costs.

I emphasise that figure of £1.2 billion. There has been some commentary that it needs to be absorbed by suppliers. Frankly, that is not realistic. For instance, in one of the biggest areas—social care staff and care workers—you have agencies that just are not capable of absorbing that level of cost. They will have two options: get a price rise from the council, or stand away from their contracts. We councils cannot afford that so we will inevitably be forced to pay the extra amounts of money.

For example, in Central Bedfordshire Council—where I am a councillor and therefore declare an interest—the shortfall is around £2 million for the direct costs after the financial settlement. I talked to the finance director yesterday and he estimated indirect costs of around £10 million. To put that in context, that is more than a 5% council tax rise will generate. So, even after such a rise, we will not cover the national insurance rise.

That will inevitably mean that we will have to look at cuts to our essential services, the majority of which are statutory—the classic potholes, parks, libraries, et cetera. They are all up for grabs, so to speak. That is just not fair on our residents, who are paying additional council tax and seeing cuts to their services. I support the amendment, so that the impact of the national insurance rise can be truly worked out on a council basis and then properly funded.

[Baroness Kramer (LD)]

My Lords, I realise that I am very much in danger of becoming repetitive, but this is the last grouping that we will deal with today. If I may, I always feel like cheering on the noble Lord, Lord Porter, every time I hear him speak, which may put him in jeopardy, but it is probably reflected by voices across the Committee.

The issues being raised are crucial. I will not repeat the discussion that we had last Monday and Wednesday, which covered this same area in great detail. However, the amendments put forward then, which would basically exclude adult and child social care, housing associations, charities and others from the changes in the employers’ NICs threshold, would answer very many of the problems that local authorities are going to face. While I understand that this amendment seeks an impact assessment, we go for exclusion of these various necessary services and on that, once again, we stand our ground.

I thought that there might be some mention of town and parish councils in this group, which will get no protection at all from the increases in employers’ national insurance that they will face. We put forward an amendment last week that would exclude them from this. Once again, I ask that town and parish councils not be overlooked in the process of understanding that the public sector will be protected. With the changes that the Government are mooting in going to strategic authorities, town and parish councils will be the only real local government layer left, quite frankly, where somebody within a community knows that community, speaks to the people in it and acts on their behalf. Because they are funded purely through tax rather than through some government grant, the Government have not given them the off-set for the additional costs that they will have to carry. They amount to so little—£10 million a year. The Government would not even notice it. Without that, because they have no other sources of income, they will absolutely be required to increase their taxes by between 1.5% and 3.5%.

These councils should not be overlooked. They might be very small, but they are vital. For many people in this era, they are the connection to politics in a world where there is so much cynicism over politics and people do not feel the reality of it any more. I hope very much that the Conservatives, having made such strong statements on the effect of all these changes, will consider coming into the Lobbies with us on Report.